# FILED

April 23, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk BVT LEBANON SHOPPING ) CENTER, LTD., a Te

nnessee Limited ) Partnership, ) ) Plaintiff/Appellee, ) Appeal No. ) 01-A-01-9710-CV-00607 v. ) ) Wilson Circuit WAL-MART STORES, INC., a ) No. 9113 corporation; and KUHN'S-BIG-K ) STORES CORP., a Tennessee ) corporation, ) ) Defendants/Appel

lants. )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE WI LSON COUNTY CIRCUIT COURT AT LEBANON, TENNESSEE

THE HONORABLE BOBBY CAPERS, JUDGE

THOMAS V. WHITE KENNETH F. SCOTT Tune, Entrekin &

White, P.C. 21st Floor, First American Center 315 Deaderick Street Nashville, Tennessee 37238 ATTORNEYS FOR PLAINTIFF /APPELLEE

JON B. COMSTOCK 702 S.W. 8th Street Bentonville, Arkansas 72716
THOMAS W. LAWRENC E, JR. Parker, Lawrence, Cantrell & Dean 200 Fourth Avenue

North Fifth Floor Nashville, Tennessee 37219 NEAL AGEE, JR. Agee, Agee & Lannom P. O. Box 649 Lebanon, Tennessee 37088-0649 ATTORNEYS FOR DEFENDANTS/APPELLANTS

AFFIRMED AS MODIFI ED, AND REMANDED WILLIAM B. CAIN, JUDGE-2- 

## O P I N I O N

This is a suit by a l imited partnership as owne r of a shopping center

in Lebanon, Tennessee against Wal-Mart Stores, Inc. alleging breach of a lease contract.

In 1968, J.R. Free

man, Truste

e as lessor, enter

ed i nto a lea se agreement withKuhn Brothers Co., Inc. as le ssee of certain premises in a commerc ial shopping center known as The Center of Lebanon. This

leasewas to expire in 1984. The lease provide d a guaranteed m

ini mum annua

l rent of $70,000.00, together with 2 1⁄2% of al l gross receipts ov er $2,333,000.00 pe r annum.

Wal-Mart acquired Kuhns and t

he 1968 lease agreem

ent was amend

ed in 1981 with Freeman, Trustee still as landlord and Wal-Mart as lessee. In this 1981 amendment

to the lease the term

thereof was exte

nded from 1984 thr

ough 1996. The guaranteed m

inimum ren

twas increased from

$70,000.00 per annum to $136,000.00 p e r annum with gr oss receipts perce

ntage rent declining incrementall

y with increased gross

receipts. The permitted "use" was changed from a "retail promotional type store" to a "discount department store. "

BVT acquired The Center of Lebanon from Freeman Trustee, and in 19 85 Wal-Mart determined a n

eed to expand the leased premises. T his resulted in a 1985 amendment

to the lease where

by the size of

Wal-Mart's pr

emises was to b

e expanded from 50,000 square feet to 8 4,0 00 squar e feet with the cost of such expansion

to be borne by BV

T. This necessit

ated the purchase of additional real estateand the buyout

by BVT of the

Foodtown lease whi

ch was adjacent

to the existing Wal-Mart pre mises. Wa

l-Mart suppli ed the plot plans and specifications

for the expansion

and BVT paid appr

oximately $ 1,500,000.00 to complete the W

al-Mart expansion.

The 1985 lease ame

ndment extended t

he term of the lease for nine additional years to 2005. T he guaranteed m

in imum rent was changed from $136,000.00

annually to $272, 000.00 with an in cremen tal reduction in percentage

of gross receipts r

ental tied to increa

sed gross receipts

of Wal-Mart.-3- Wal-Mart was quite successful at The Center of Lebano

n. By 1994, the gross-receipts

percentage

rental by Wal-Mar

t to BVT compr

ised approximat

ely 37% of t he tota l rent p aid ann ually.

In 1994, Wal-Mar

t determined to

vacate The Cente

r of Lebano n a nd relocate t o a new supe

r center to be const

ructed within a shor

t distance of the demised premises. Negotiations betwee n BVT and Wal-Mart failed, and BVT filed suit October

6, 1994 in anticipator

y breach of con

tract.

On May 24, 1995, ove r the objections o

f BVT, Wal-Mart ceased operations and vacated The Center of L ebanonpremises, co

ntinuing to pay the $272,000 annual minim

um rent. Five months later it opened a "Bud's Discount City" in the spa ce vacat ed by Wal- Mart. "B ud's Di scount City" is wholly owned by Wal-Mart and ha

d generated from two to thr ee million dolla

rs in gross receipts per annum at the time of the trial of this case.

BVT asserts that Wal-Mart breached the express "use" clause of the lease and an implied

covenant of continuous occupancy. Non-jury trial in April, 1997 resulted in an August 27, 1997 j udgment in fa vor of BVT for compensatory damages in the amount of $2,507,67 4.00, together wi th $108,759 plus intere st for failure to include third party receipts, attorney fees, sanctions a

nd costs. The trial court found breach o f the express "use" c

ovenant and breach of an implied covenant of continuous occupancy . From this j udgment Wal- Mart has appealed. BVT asserts er

ror as to the am

ount of damages a

warded.

I. PROCEEDINGS IN THE T RIAL COURT This court marks w

ith empathetic

chagrin the

acrimon ious and heated nature of the proceedings be low. Wal-Mar

t complains wit

h considerable justification

that the findings of f

act and conclusions of

law contained in t he August 27, 1997 order are inconsistent with findings announced by the court at various stages of the trial and appearing in the e videntiary tra

nscript. Because of these inconsistencies, Wal-Mart urges in its brief that the f indings of fact and conclu sions o f law in the August 2 7, 1997 order should be

disregarded by this court. The law o f Tennes see, ho wever, i s well s ettled to the c ontrar y.-4- Cases predating the Tennessee Rules of Civil Procedure left no room for doubt on this point, and a s this court has observ

ed: A judgment

must be reduce

d to writing

in order to be valid. Itis inchoate, and has no

force whatever

, until it has been reduced to writing and entere

d on the minutes of

the court, and is co

mpletely within the power of the judge or Chancellor. A judge may mod ify, reverse, or make any other change in his judgment that he ma y deem proper, until it is entered on the minutes, and he m ay the n change, modify, vacate or amend it during that term , unless the term continues longer than thirty days after the entry of the j udgment, and then until the end of

the thirty days. Broadway

Motor Co., Inc. v. FireInsurance Co. , 12 Tenn. App. 278, 280 (1930).

This rule survived the adoption of the Tennessee Rules of Civil Procedure. Sparkle Laundry and Cle aners , Inc. v. Kelt on , 595 S.W.2d 88,

93 (Tenn. App. 1979); Evans v. Perkey , 647 S.W.2d 636, 641 (Tenn. App. 1982).

As observed by the C

ourt of Appeals for

the Western Secti

on: "We do

not review the court's oral st

atements, unless incorporated in a d ecree, but revie

w the court's order and judgments for that is how a Co urt speaks. " Shelby v. Shelby , 696 S.W.2d 360, 361 (Tenn. App. 1985).

The proposed findin gs of fact and conclu sions of law and t he order of August 27, 1997, were prepared by the attorney for the plaintiff and adopted by the court. Prior to the

adoption of the Tennessee Rules of Civil P rocedure, this procedure was an improper action and re versible error. Nashville, Chattanooga and St. Louis Railway Co., et al v. Price , 125 Tenn. 646, 148 S.W. 219 (T enn . 1911).

The a doption of Rule 52 of the Tennessee Rules of

Civil Proc edur e modified Price and the supreme court has held: Although we believe Pric e w as correctly decided, we think the adoption of the Rules o f Civil Procedure

calls for modif

ication of it s holding. We agre

e that the prepara

tion of findings and conclusions is a high judicial funct ion. We are co

mmitted to t

he requirement

that the tr

ial cou rt's findings and conc lusions be its own. However, we are also aware that the thorough

preparation of suggested findings and conclusionsby able counsel can be of great assistance to the trial court. In an effort to strike a balance between-5- these considerations, we hold that although it is impro per for the trial court to require co

unsel to pr

epare f indings, it is perm

issible and indeed sometimes

desirable for the trial court to permit counsel fo r any p arty to subm it proposed findings and conclusions. F indings prepared by the trial judge whic

h represent hi s independent

labor are prefer

able, however w

e do not disapprove

of party-prepared

findings. This is a modification of Price which we feel is more consonant w

ith the Rules of Civil

Procedure. W

e wish to point out that before a

dopting findings prepared by counsel, the trial judge should carefully examine them to establish that they accurately

reflect his view s and conclusions, and not thos e of counsel. He should also ascertain that they ade quately dispose of all material issues, and to assure that matters not a p

roper part of

the determination h

ave not been included.
Delevan-Delta C

orp. v. Roberts , 611 S.W.2d 51, 52-3 (Tenn. 1981).

The order in this case pr

epared by counse

l for the plaintiff

was the subject of extensive discussion between counsel and the court before it was entered. At the end of this discussion counsel for the defendant attempted to have the court ent er a simple order

granting judgme

nt without findings of f

act or conclusions of law. The re

cord reflects: THE COURT: Now, what else, sir? MR. AGEE: That' s all on their proposed order, Your Honor. I would tender to the Court a draft order that I

would give to the Court which --

MR. WHITE : Judge, we've ne ver seen it. THE COURT : All right. MR. COMSTOCK: T

hat's correct. But it's a v ery simple order, and what i

t really does is [is] it

allows all the findings that the Court has made on the rec ord to be the Court's

findings, and itallows the order to

simply reflect the ultimate decisions that are being made. THE COURT: Let me suggest this to you: I like

Mr. White's order fine because everybody wanted t he fi ndings of the facts a nd all of these other is sues. That's wha t you wanted the Courtto do, make spe

cific findings of fa

ct, and that's exactly

what you sat here and asked m e as relates to this order today that I sp ecifically

make that findi

ng of fact and all these other thi ngs . AndI'veaddressed that iss ue, and they are in there. And you have originally requested that, a

nd I'm going to

hold you to that request. So Mr. White's or

der properly r

eflects what's been requested by the defendant in this matter. So for

that reason, I'm

more inclined t

o accept Mr. White's or

d er, to be an order

, and it also refle

cts the findings of fact by the Court. Now, what else?

MR. COMSTOCK: May I on my original simply put "Wal-Mart dra

ft," and then file

that with the cler

k?-6- THE COURT: You certainly m ay. Okay. Now -- MR. COMSTOCK: Your Honor, t hat's all on that. THE COURT: All right. Well, then the Court is going to sign the order.

This court re cognizes the marked discrepen cy between the written findings of fact and the trial

court's oral findin

gs throughout the transc

rip t. Alth ough puzzling in result, the only conclusion

to be drawn from the difference is that, for whatever reason,

the court below cha

nged its mind.

Under the foregoing rules, th e findings of fact and conclusions of law reflectedby the or der of Au gust 2 7, 1997 are the o nly findings of fact and conclusions of

law of the trial c

ourt. They al

one are reviewa

ble on appeal under Rule 13(d) of the Rules of Appellate Proce

dure with a presum

ption of correctness

unless the evidence preponderates to th e contrary. Foster v. Bue , 749 S.W.2d 736 (Tenn. 1988).

The conclusions of law dr awn by the tria

l court are review

able de novo on appeal without presump

tion of correctness

. Tennessee Farme rs Mutual Ins. Co. v. Moore , 958 S.W.2d 759 (Tenn. App. 1997).

The findings of

fact and conclusions of law

of the trial court r

eflected by the order of August 27, 1997 are:

(a) The lease at issu e c ontains a percentag e rent clause and the intent of the partie s at thetime the lease was executed was that both base rent and perc

entage rents wou

l d be realized during

the term of the lease; be it p

rovided by the exi sting "Wal-Mart " discount department sto

re, another discou

nt department s

t ore , or any other lawful use a

cceptable to the

landlord that would generate the same amou

nt of percentage r

ent income tha

t was capable of being generated by th

e "Wal-Mart" discount department store that ceased to operate in the demised pr emises. (b) The premises were expanded at Wal-Ma rt's request and accordin g to Wal -Mart's plans as r eflected in the 1985 L

ease Amendme

nt. Although the 1985 Am endment extende

d the lease term to twenty ye

ars, the increase in base rent alone wo uld not have amortized the

cost of the expansion o

ver the twenty

years. (c) The plaintiff

would not have

made the expend

itures of approximately

$1.5 milli on to expand the prem ises except in-7- contemplation

of receiving a per

centage of

sales in addition to

base rents. (d) Bud's is not a "discount department store" as contemplated

by the parties at the time they entered into the lease. Therefore, Bud's does not meet the requi

rements of the

lease. The Courtbases this conclusion i n part upon Wal- Mart's own adm issio ns in its letters, com munications and a

dvertising both by flyer and on the

Internet. (e) Gross sales in the dem ised premises i

nc reased each year from 1981, the first ye ar Wal-Mart, Inc. operated its

"WalMart" discount departm

ent store in

the premises until FYE January 31, 1995, the last full

year that W

al-Mart operate

d its "Wal-Mart " discount department sto

re in the demise

d premis es. Although the threshold for percentage

rent was increased from $6.825 m illion to $18.133 million, conte

mporaneous

withthe 1985 Amendm

ent and expansion, gross sales a gain exceeded the $18 .133 million threshold within two yea

rs after the

expansion

in 1986. Percenta

ge rents were generated

starting in FYE 1988 and increased every year thereafter inclu

ding FYE January

31, 1995. (f) "Discount

Department Store" is a business term used in the retail industry

which the Court has no i nd ependent qualification

to define. Howev er, the Court finds that the parties contemplated

a definition

more specific

than thebroad combinati

on of the definitions of

"dis count" and "departm ent" found in We bster's Dictionary . The Court furt her finds that the pa

rti e s contemplated

thata"Discount Depart

ment Store" w

ould posses[s] th e characteristics

offered by pla

intiff's expert,

Wayne Tom

linson and, therefore, adopt

s the following defin

ition: "a large, hi

ghvolu me m erc handising establishm ent that (I) prese

nts an accurate image to the cons umer

that it is a discount de

partment store , (ii) sells basically the sa

me type new

high quality soft a

nd hard goods day in and day out, (

iii) sells at a discount and at a minimal m

arkup, and (iv) is open to the public seven days a we

ek (usually 9 a. m. to 9 p.m. six days and Noon t o 5 p.m. on Sunda

ys." Large w

ould mean approx imately 10 ,000 square feet and larger and high volume, would mean annual sa

les g reat er than 5 times its inventory value. (Typically

between 150-400/Squ

are foot using 1995 publi sh ed data). It is a

store that carries the same ty pe quality new go

ods from week to week and is op e n typi cally s even d ays a we ek, in some instan ces twen ty four h ours a d ay. (g) Except

for the square footage, the Bud's at Leb ano n does not meet any of the criteria of a "discount departm

ent store" as contemplated by

the parties. (h) No retail sales wer e conducte d from the prem ises for aperiod of four m

onths when the "Wa

l-Mart" discount department-8- store ceased opera

tions until the "Bud's" operation began. (i) Defendantshave provided plaintiff with multiple

and conflicting

reports of gross sal

es, some years including t hird-party drug sales and som

e years exclud

ing third-party drug sales. (j) Itwas necessary

for the plaintiff/l

essor to employ counsel and o th erwise incur expe nses in connection wit h defendants anticipatory breach and subsequen t acti ons regarding th e demised premises and the subject lease.
2. The Court makes the followi ng conclusions o f law: (a) This is a

contract construct

ion case and

the Court has to determine the intent of the parties at the time the contract was entered into from the entire contract and construe the contract such that its terms are in harmony with each other. (b) The Bud's operat ing in the demised premises is not a "discount department st

ore " as required under the subject lease, and, therefore, the defendants have breached the "use" clause of

the subject lease. (c) There is an implied cov enant by the def

endants t o continuously

operate either a discount department store , as contemplated

by the parties i

n 1985 and as previously described in this order, or

any other lawful business that

would make re

asonable commercial

sense for the plaint

iff to accept. The Court further finds that the d efendant s have breached this covenant and that it would be reasonable for

the landlord to withho

ld consen t for the operation of a Bud's as a replacement tenant. (d) The defendants have im properly withheld percentage rent attributable

to third-party sales conductedwithin the demised premises. Furthermore, defen dants failed to disclose to plaintiff that they changed their position relative to these third-party sales at some time a

fter the 85 ame

ndment. (e) Defendants h ave admitted, pursuant to Kandy Be aver' s affidavit and dep ositio n that t hey have er roneously deducte

d certain items in addition to third-pa rty gross sales f

rom gross rece

ipts when reporting and pay

ing percentage ren

ts. (f) The plaintiff has been d amaged as a result of th e defendants' breaches of the lease. (g) Pe r the lease and pursuant to the Court's inhere

nt author ity, given the circum stances of this case regarding the withholdingof accurate gros s receipt inform ation by defenda

nts, the plaintiff is entitled to audit the defendan ts' records to

determine the amount of

gross receipts fro

m the demised premises; in cluding-9- third-party

drug sales and otherwise, to ascertai n the amount of percentage

rent that shoul d hav e been paid plaintiff from 1985 to present. (h) Pursuant

to the lease, Pla

intiff is entitled to attorneys' fees and expenses.

Based upon the foregoing findings of fact and conclusions of law the trial courtentered a com

pensatory dam

age award in the a

mount of $2,50

7,67 4.00, representing

the present value of lost future percentage rents for the duration of the lease.
The August 27, 1997 or

der further provide

d: 5. By previous Order, this Court gran ted the plaintiff's motion for partial summary

judgment on the

issue of the

defendants' failure to include gross rece ipts (and to pay th

e plaintiff their respective

part of the se gross receipts)

of third-party

tenants, and, based upon statements o

f counsel for both par

ties, a review of

the file, and the testimony

before this Court, this Courtgrants an award of $108,759.00 plus interest at 10 perc ent through 1/31/97, for a total of $144,689.75 plus $39.64 per diemfor every day thereafter until paid. This award is primarily based upon the Court's acceptance of the tes timony of Sa m Boles, the w

itness for the pl ain tiff with respect to the

calculation of these

monies and the interest on these m o nies from January 1 of each of the years refer enced in trial Exhibit B, which is attached to this Ord er an d incorporated herein by reference . The Court further aw ards attorneys' fees in the amount of $10,125.0 0 (67.5 hours at $15 0/hr.) plus expenses in

the amount of $828.75, for a total of $10,953.75.
By supplemental order entered September 9, 1997 plaintiff was awarded attorneys' fees in the amount of $170, 042.61 for the perio d through June 30, 1997 and sanctions against defe n dant Wal-Mart i n the amount of $6, 240.00, representing fees

due to auditors for w

ork done in Bentonville , Arkansas.

II. ISSUES ON APPEAL The first issue

on appeal asserted b

y Wal-Mar

t is its proposition number

one that "Wal-Mar

t's act of ceasing

its 'Wal-Mart

Discount Store' op

eration, and commenci

ng its 'Bud's Discount

City' operati

on is not abreach of any e

xpress or implied term of the contract."

This issue comprises the heart of this case. The trial court has held: 1)-10-

'Bud's Discount

City' is not

a 'discount departm

ent store' within t

he meaning of the 'use' claus e of the leas e agreement an d, 2) Wa l-Mart breached an implied covenant of continuous occupancy under the lease.

General ly th e law recognizes two distinct types of implied cont racts: contracts implied in fact and contracts implied in law, commonly referred to as quasi contracts. Paschall's, Inc. v. Dozier , 407 S.W.2d 150 , 153 (Tenn. 1966).

The difference s between contrac ts implied in fact and contracts implied in la w was delineated

by the court of a

ppeals in the context o

f a ph osphat e mineral lease

in Weatherly v. American Agricultural Chemi

cal Co. , 65 S.W.2d 592 (Tenn. App. 1933). The court observed :

In none of

these provisions was the de fendant expressly obligated to mine and rem ove from the

complainants'

premises all of the specified mineral within the term of twenty years. Contracts impliedin fact arise under circumst ances which, according

to the ordinary course of dealing an d the commo

n understanding of m

en, show a mutual intenti

on to contract. Such an agreem ent may result as a legal inference

from the fac

ts and cir c umstances of the case. 6 R. C . L. 587; 13 C. J.241. "Contracts im plied in law, or m

or e properly quasi or constructive

contracts, are a class of obligations which are imposed or created by law without t

he assent of the par

ty bound, on the ground

t hat they are dictated by reason and justice and which are allowed to be en forced by an action ex con tractu." 13 C. J. 244. Wit

h these definitions in m

ind, we must de

termine whether or not such an agreement

as is insisted upon was

implied.
The doctrine

of duty upon the les see of minera ls to develop the leased premises to the mutual prof it of himself

and the lessor by exerci sing reasonable diligence has been applied in many cases upon the th eory of implied contr act and upon principle s of equity and justice; but t

he court can declare im

plied covenants to exis

t only when there is a sat

isfactory basi s in the express contr act of the parties which makes it

necessary to im

ply certain du

ties and obligations in order to effect the purp oses of the parties to the contractmade. And before a covenant will be im

plied in the express terms of a contract, or in view of the customs and practices of the bu sines s to wh ich th e cont ract r elate s, it mu st a ppear therefrom that it was so clearly in the contemplation of the parties that they deeme

d it unnecessary to express it, or that it is necessary to imply such c

ovenant in order to give effect

to the purpose of the contract as a whole. Weatherly v. A

mericanAgricultural Chemi cal Co. , 65 S.W.2d 592,

598 (Tenn.-11-

App. 1933).

Thesegeneral rules provide the param eters within whic

h the question of the existence or nonexistence of an implied covenan t of continuous occupancy must be determined.

Itis well to observe

at the outset that although the lease documents in iss ue did contain "use" clauses, none contained express covenants of continued occupa ncy. Nor is the lessor a tt empting a right of re-e

ntry pursuant to th

e use clausea s such r ight is incorporated i nto the 1968 lease and bo th the 1981 and 1 9 85 amendments. Since Wal-Mart is continuing to pay the $272,000.00 per

annum "minimum

rent" set by the

1985 amendm

ent, it matte

rs l ittle wh ether "Bud's Discount City" i s an operation in violation

of the "use" clause

of the lease in the absence of an im

plied covenant of cont

inuous occupancy.

By the express terms of the lease as am

ended, there is no

prohibition against

Wal-Mart vaca

ting the premises in its entirety, t hus produ cing no gross receipts at all. Wal-Mart would, of course, be obliga ted under the term

s of the 1985 amendment to continue paying

the $272,000.00 per year rental t hrough the end of the te

rm of the lease in 2005. The case thus turns on whether or n o t there is an implied covenant of continuous occupanc

y as found by t

he trial court and w

hether or not "Bud's Discount Cit

y" qualifies as a tenant under such a n implied covena

nt.

This inquiry begins wi

th Kroger v. Chemic

al Securities Co. , 526 S.W.2d 468 (Tenn. 1975).

In Kroge r , the Tennessee Supreme Court correctly noted the general disfavor accorded

to such implied c

ovenants, sayin

g:

. . . such impli

ed covenants must

arise from th

e terms of the

lease itself.
One clause which m ight, arguab ly, support such covenants is the percentage renta

l clause. Howev

er the Court of App

eals did not rely on this provi sion in reaching its conclus ion, and considering the substantial sum se

t as the base rental

and the small an

d speculative

nature of the override, w e likewise do not find that clause determinative.-12-

Kroger Co. v. ChemicalSecurities Co. , 526 S.W.2d 468 , 471-72 (Tenn. 1975). Fi rst and foremost a

mong circum

stances supporting the

implied covenan

t is a p ercentage rental clause such as exists in the case at bar. The Kroger court recognized but distinguished Slidell Investment Co., Inc. v. City Product Corp., 202 S.2d 323 (La. A

pp. 1967) involving a

substantial percent

age override of the "minimum rent" under the lease.

We begin this discussion by stating that: ". . . The decision whe ther to imply a covenant of continu

ous operation must

be evaluate d at the time the parties signed the agreement." Nalle v. Taco Be ll Corp ., 914 S.W.2 d 685, 688 (Tex. App. 1996). The critical time is June of 1985 when the partie s executed the "third amendment to lease".

In this 1985 amend

ment, (1) BVT agreed at the

request of the W

al-Mart to expand th

e Wal-Mart premises from 50,000 to 84,000 square feet. This was accomplished a

t a cost to the BVT of approxi

mately $1, 500,000.00. (2) T he Wal-Mart agreed to operate a "discount department store " o n the premises. (3) The term of the lease wasextended for an additional nine y

ears to expire January

31, 2005. (4) The "fixed annual m inimum rent" was increa

sed from $136,0

00.00 to $272,000.00. (5) The percentage rent was set at one and one-half percent of gros s receipts in excess of $18,133, 333.00 to and including $2 0,000, 000.00 in gross receipts and thereafter on

e percent of gross receipts in

excess of $20,000,0

00.00.

The Court of Appe als of Ida ho stated in synopsis

the rules applicable

to lease provisions sim

ilar to the one agre

ed to by BVT a

nd Wal-Mart. [5] The major prerequisite for a findi ng of an implied c ov enant in a percentage rental agreement is that the stipulated minimum rental must not

be substantial cons ideration. See Archer v. Mountain Fuel Supply

Co ., supra, 102

Idaho at --- - -- -, 642 P.2d 943; Professional Building of Eure ka v. Anita Frocks, Inc ., 178 Cal.App.2d

276, 2 Cal.Rptr.914 (1960); Lippman v. Sears Roebuck & Co. , 44 Cal.2d 136, 280 P .2d 775 (1955); Masciotra v. Harlo w ,-13- 105 Cal.App.3d 376, 233 P.2d 586 (1951); Kroger v. Bonny Corp ., supra; Stop & Shop, Inc. v. Ganem , 347 Mass. 697, 200 N. E.2d 248 (1964); PBJ Company, Inc. v. Ben Duthler, Inc ., 89 Mich.App.767, 2 8 2 N.W.2d 216 (197 9); Bobenal Investment Inc. v. Giant Super Markets, Inc. , 79 Mich.App. 31, 2 6 0 N.W.2d 915 (1977); Cres two od

Plaza, Inc. v. Kroger Co. , 520 S.W.2d 93 (Mo.App.1974); Kretch v. Stark, 193 N. E.2d 307 (Ohio Com.Pl.1962); Brown v. Safeway , supra. Parol evidence is properl

y admitted to determine w

heth er min imum renta

ls are substantial. Werry v. Phillips Petroleum

Co ., 97 Idaho 130, 135,

540 P.2d 792, 797 (1975); Anita Frocks, In c ., 1 78 Ca.A pp.2d at 278-79, 2 Cal.Rptr. at 916; Lippman , 280 P.2d at 780- 81; PBJ Company , 282 N.W.2d at 218. The bu rden of showing a dispa rity between t

he fixed minimum rent and fair re n tal value sufficie

nt to furnish grounds for implying a covenant is o n the lessor. Stop & Shop Inc ., 200 N.E.2d at 252. Bastian v. Albertson's, Inc. , 643 P.2d 1079, 1082-1083 (Idaho 1982).

We must first determine whether or n ot the $272,000.0 0 per year is "substantial con sideration."

Atthe time of the June, 1985 amendment to the lease, a ll parties were aware of the prior history of percentage rental experience under the lease.

Fiscal Year Adjusted Sales Base Percent Amount Paid 1981 1982 2,047,072.56 1,361,110.0 0 2.50% 17,149.06

1983 4,931,115.09 6,825,000.0 0 2.00%

1984 7,539,155.97 6,825,000.0 0 2.00% 14,283.12

1985 8,981,538.49 6,825,000.0 0 2.00% 43,130.77

Thus is reflected the c ontinued growth of W al-Mart sales and corresponding

percentage rent payments to the lessor prior to the June, 1 985 amendment

to the lease. Pe rcentage rentals during this period incr eased from $17,149.06in 1982 to $43,130.77 in 1985. G ross sales increased four

fold from 1982 through 1985.-14- The 1985 amendment to the lease which incr eased the base rent

al from $136,000.00

to $272,000. 00 co rresponded with the increased base sales that would be required befor

e any percenta

ge rent would b e paid to the lessor after the expansion.

From 1 986 to 1990, Wal-Mart's adjusted gr oss sales did not excee

d the amount required to trigger p ercentage rent. However, the m inimum amount was triggered by the adjusted

gross sales in 1990. T

he 1990 through 1995 experience shows:

Fiscal Year Adjusted Sales Base Percent Amount Paid

1990 19,485,627.52 18,133,333.00 1.50% 20,284.41
1990 Total 20,284.41 1991 20,524,449.94 18,133,333.00 1.50% 28,000.00 1991 20,000,000.00 1.00% 5,244.49 1991 Total 33,244.49 1992 22,409,535.46 18,133,333.00 1.50% 28,000.00 1992 20,000,000.00 1.00% 24,095.36 1992 Total 52,095.36 1993 25,376,102.00 18,133,333.00 1.50% 28,000.00 1993 20,000,000.00 1.00% 53,761.02 1993 Total 81,761.02 1994 26,298,243.00 18,133,333.00 1.50% 28,000.00 1994 20,000,000.00 1.00% 62,982.43 1994 Total 90,982.43 1995 29,551,354.91 18,133,333.00 1.50% 28,000.00 1995 20,000,000.00 1.00% 95,513.55 1995 Total 123,513.55

The term "fixed a

nnual minimu

m rent" used in t

he 1985 amendm

ent to describe the $272,000.00 p er annum base rental has no fixed legal meaning. As the Supreme C

ourt of California

has held: The term "minimum

monthly paymen

ts" ha s no fixed legal significance; its meaning can be ascertained only by refe

rence to the circumstances in which the lease was executed. Extrinsic evidence, therefore, wa

s properly adm

itted to show those cir

cumstances. Sears maintains that t

he evidence does not support the finding that $285 per month "was intended to be and was , in fac t, a nominal rental and was not a substan tial or adequate minimum rental."-15- Ordina rily, when used in connection with monetaryobligations, the word "nominal" denotes "a trifling sum" (Black's Law Dic. 4th E d. 1951, p. 469), and Sears is correct in the contention that more than that amount wa s required by the lease. But a find

ing that, within the contemplation of

th e parties , $285 per month w as not a substantial and ad equat e minimu m rent to be paid in lieu of a percentage

of the sales is a sufficient basi s for a determination that Sears impliedly c

ovenanted to use the de

mised prem

ises for the sale of merchandise during the entire term of the lease. It was no t necessary that the

trial court go farther,

and the character

ization of the minimum

rent as nominal

is superfluous. Lippman v. Sears R

oebuck & C

o. , 280 P.2d 775, 780-781 (Cal. 1955).

The "substantial-insubsta ntial" question is tied closel y to market value i

n the law g overni ng impli ed cove nants o f conti nuous occupa ncy.

The plaintiff contends

that notwithstanding t

he interest of

the lessors in having the

premises oper

ated so as to give it the

benefit of possible percentage rent, the absence of an express requirement to operate together with a more than nominal minimum

rent exclude the implication of a covenant to conti nue operations.
This may s tate too broad a rule. For even if there is a more than nominal minimum rent, other ci rcumstances su ch as that the fixed rent is significantl

y below the fai

r rental value of t

he property might justify the conclusion that the parties intended that the lessors have the benefit of th e percentage rent thro ughout the term. Stop & Shop, Inc. v. Ganem , 200 N.E.2d 248, 251 (Mas s. 1964).

The evidence in this case indicates that the $2

72,000.0 0 per annum minimum rent was well below the fair market re ntal in L ebanon and the surroundingareas at the tim e the parties agre

ed to the 1985 ame

ndment. Converted to square foot rental the base rent paid by Wal-Mart in this case was $3.40 per square foot. T

he proof showed that

the market value

in Lebanon and the surrounding areas r

anged from $4. 59 to $5.40 per square foo t. Th e record further shows that the $136,00

0.00 per annum i

ncrease in

the base rent

standing alone would

be insufficient to am

ortize the $1,500, 000.00 cost of expansi on of the Wal-Mart lea

sed property

which expansion wa

s accomplished a

t the request of Wal-Mart and paid for by BVT.

In First American Bank &

Trust Co. v. Safew

ay Stores, Inc. , 729 P.2d 938-16-

(Ariz. App. 1986), the tr

ial court made

the following perti

nent findings of fact : The trial court found that the four gentlem

en who negotiated the leaseon behalf

of Bet z were experienced shopping center developers. It al so made the foll owing pertinent find

ings of fact:
16. The base rent of $1.46 per square foot per year was not in itself a fair

, adequate, or m

arket rent when the lease was made.
17. Defendant has continued to pay the base re nt, which amounts to $2,500

per month, but has generated and paid no percentage rent s for the period fro

m December 24, 1983, to date.

* * *
19. A covenant of continuous operation arises from and is implied by

the language and the p

rovisions of the lease, parti

cularl y the clauses pr

oviding for percentage

rent, requiring

the landlord to build to suit as a grocery stor

e (paragraph 5 ), and restrictin g competition

in the shopping center (par agraph 14) and o n adjacent property (paragraph 29) and it appears from the language of the l ease that De fendant's continuous op era tion was so clearly within the contemplation

of the parties that they deeme d it unnecessary to e

xpress it.
20. The subject of continuous operation was never discussed between the parti es and is not completely covered by th e lease. A coven ant of continuous operation would ha

v e been made or

required by the landlord if attent ion had been called to it. . . . 729 P.2d 938, 940.

The Sa few ay court, adopting the s ame factors to be considered on the question of implied

covenants of

contin uous o perati ons rel ied upo n by Lippman v. Sears Roebuck C

o. , 280 P.2d 775, 779 (Cal. 1955), stated t he following: (1) the implication

must arise fr

om the language u sed ...; (2) it m ust appear from the langua

ge used that it was so

clearly with

in the contemplation

of the parties that they deemed it unnecessar y t o express it; (3 ) implied covena nts can only be j ustified on the grounds of legal necessity; (4) a promise can b

e implied only

where itcan b e ri ghtfully assum ed that it would have b een made if attention had been called to it; (5) there can be no implied covenant where the subjec

t is completely

covered by the c

ontract.-17-

Safeway , 729 P.2d 938, 940 (Ariz. App. 1986).

With these factors in mind the Safeway court concluded: Safeway contends that the te s timony of Betz' expert appraisal witness does not support the trial court's c onclusion that the base rent was inadequate and

that the provision of the le ase allowing Safeway to assign the leas e preclud es the trial court f rom finding the existence of an implied covenan t of continuous operati

on. We do not agree. The e

xpert witness un

eq uivocally testif

ied that the base rent was n ot equal to the fair rental value of the premises leased to Safeway. He testified that the perc entage clause of the leasehad to be considered i n calculating

the fair rental value of the property and, absent the per

centage provis ion s, the monthly minimum rental was not suff

icient tosatisfy the obligations that the landlord would in cur in financing the c onstruction and develop

ment of the p ropert y. The court found that t here was noincongruity betwee n paragraph

13 of the lease, w

hich allowed Safe

way to su blet and assignthe lease, and an i

mplied covenant of

continuous operation. Sa fewayargues that an im plied covenant of cont

inuous operation is repugnant to the provis ion of the lease allo

wing it to assign the entire lease. On that issue, we agree with the conclusion of law made by the

trial court: The presence o f a right to assign or subl et is not necessarily

inconsistent with an i

mplied covenant of continuous opera tio n. The two covena nts can be harmonized

to permit subletti

ng or assignment t

o a business of the same character. Safeway , 729 P.2d 938, 940-41 (Ariz. App. 1986).

The "risk sharing facto

r" inherent in a

percentage renta

l lease is a part of the consideration m

utually agreed to between the part ies:

The issu e of whether there is a n implied covena

nt of continued operation arises be causethe lease did not fix the r ent, but guaranteed a m

inimum pay

ment plusa percentage based upon the gasolinedelivered. In hav ing a percenta

ge lea se, the parties contemplated

a lengthy associa

tion (20 years)

during which rents would periodically be established by the market place.
A pe rcentage lease pr

ovides a lessor with a hedge against inflation and automatica

lly adjusts the rents if the

location becomes morevaluable. ( Resolving Dis putes Under Percentage Leases (1967) 51 Minn.L.R. 113 9, 1139; see also Powell on Real Pr operty-18- (1986) vol. 2, § 242[1], pp. 372. 15-372.20.) It is a dvantageous to the lessee if the "loca

tion proves undesirabl

e or his ente

rpris e proves unsuccessful." ( Id. ) Thus, both parties share in the inherent busine ss risk. (51 Minn.L.R., supra , at p. 1150, fn. 62.) Inherent within all perce ntage leases is the fundam ental idea that the business must continually operate if it

is to be successful.To make acommercial

lease mutually

profitable

when the rent is a m

inimum plus a percentage, or

is based totally o

n a percentage, a

covenant to operate in good faith will be implie d into the contract if the minimum rent is not substantial. ( Lippman v. Sears, Roebuck & Co. (1955) 44 Cal.2d 13 6, 280 P.2d 775.)
In interpreting cont racts, " [t]he whole of a contract is to be taken toge ther, s o as to give effect t o every part .. . each clause helping to interpret the other." (Civ.Code, § 1641.) Further, contr acts are to be interpreted so as to make them reasonab l e without violating

the intention of the parties. (Civ.Code, § 1643.) To effec tuate the intent of the par ties, implied c

ovenants will be foundif after

examining

the contract as a whole it is so obvious that the parties had no reas on to s tate the covenant, the implication arises from the langua

ge of the agreem

ent, and there is a legal necess ity. ( Lippman, supra , 44 Cal.2d at p. 1 42, 280 P.2d 775.) A covenant of continued o

per ation can be implied into commercial leases con taining percentage renta l provisions in order f

or the lessor to receive that for whic h the lessor bargain ed.
C ollege Block v. Atlant

ic Richfield Co. , 254 Cal.Rptr. 179, 182 (Cal. Ap p. 2 d 1988).

Of similar import though

in the context of sum

mary jud gment is Leeds v. Alpha Beta Co. , 75 Cal.Rptr.2d 162 (Cal. 1998) whe

rein the court holds: The lease required the property owner to build a supermarket pursuant to Alpha Beta's desi

gn. The parties a

greed to a long

term leaseduring which the rent was primari

ly based on a per

centage of sales. Moreover, as the anch or tenant, Alpha Beta's continued business operation wa s imp ortant in ways other than its increased rental payments.Abandonment of the premises c

ould certainly be found to deny the land lord the benefit of i ts bargain. 75 Cal.Rptr.2d 162, 164 (Cal. 1998).

The United States Dis

trict Court for the

Eastern Distric

t of Kent uck y in Lagrew, et al v. Hooks-SupeRx, Inc. , further refined the Bastian factors:

To deter mine w hether to imply a covenant of continu

ous operation, the courts loo k to t he terms of the

lease and the su rroun ding circumstances. Generally, the courts take several-19- factors into account: (1) whether base rent is below market value, (2) whether percent

age payme

nts are substantial i

n relation to base rent, (3) whether the t

erm of th e lease is lengthy , (4) whether the tenant may sublet, (5) whether

the tenant has rights to fixtures, and (6) whether the lease con tains a noncompetitiv e provision. Lagrew, et al v. H

ooks SupeRx, Inc

. , 905 F.Supp. 401, 405 (E.D. Ky. 1995).

Thesefactors were recently applied by the Appellat

e Court of Connecticu

t in Pequot Spring Water C o. v. Brunelle, et al , 6 98 A.2d 920 (Conn. A pp. Ct. 1997) in declaring the existence of an i mplied covenant of continuous operatio ns. The Supreme Cour

t of Connecticut gra

nted an application to appeal i n th e Brunellecase on September 30, 1997 (701 A.2d 658), but the case was settled before argument in March, 19 98 and the appeal wit hdrawn.

The first three factors of Lagrew are well establi shed i n this case as the base rent is below m

arket value, the p

ercentage pay

ments are subst

antial in relati on to th e base re nt, and the ter m of the le ase is l engthy.

The fourth Lagrew factor is "whethe r the tenant ma

y subl et ". Wal-Mart may do so but under an even morerestrictive basis t han is set forth in Lagrew

. Paragraph

1(c) of the 1985 amendm

ent to the lease

must be read in c

onjunction withthe "assign or subletting" provisions on page six of the original Big K le

ase since such previous provi sion was incorporated by reference in the

1985 amendment

. Paragraph 1(c) o

f the 1985 amendm

ent provides: Itis understood

and agreed that the Demised Premises being leased shall be used by lessee

in the operation of a

discount departm

ent store, but Lessor agrees that the Demised Premises may be used for any lawful pur

pose, except for a

ny purpose which is in conflict or competition

with the Cow an 's lease (apparel) and except for a grocery store or supermarket; any use b y Lessee o ther than as a discount dep artment store shall require the prior written approval of Lessor, which ap prov al shall not be unreasonably withheld except in the case of

prohibited uses afor

esaid. The assign or sublett

ing provision of the ori

ginal Big K lease pr

ovides: The Lessee covenants n

ot to assign, mortga

ge or encumber

this-20- agreement

or sublet or use or perm

it the demised pr

emises, or an

y partthereof, to be use

d by others without the prior w ritten consent of t he Lessor, whic

h consent shall not be unr easonably withh

eld. Howe ver, Lessor expressly agre es that Lessee may, without Lessor's consen t, subl ease or a ssign this le ase to a n affil iate or subsi diary.

There has been no consent at all by BVT and th us the right to sublease without consent to an affiliate or subsidiary as provided in the "a ssign or subletting" provision of the original lease is restricted by the section 1(c) provision of the 1985 amend

ment prohi

bi ting use other than as " a discount department store".

Given these circums

tances, the discuss

io n in Lagrew is particularly pertinent: Fourth, while the limi ted s ub lease provision theor etically supports SupeRx's contention tha t the lease does not con template continuous operation by

the lessee, the sublease term is so narrowly tailored that it implies that some suitable replac emen t business would occupy the leased space if not SupeRx. Thus, a more precise statement of the implied covenant is that the lessee, or some suitable sublessee , will continuously operate on the prem

ises.
Defendantsattempt to p ersuade the Court th at their right to sublease was not narrowly

tailored and that the

land l ord's willingness to include thisprovision negates a finding of an implied covenant. SupeRx was prohibit ed from subleasing to a food store, departmen t s tore, variety store, skating rink,

beer tavern, liqu

or store, discount store, or a ny other business which would conflict withthe exclusive rights g ranted by the

landlord in

leases to other tenants. "The presence of a ri ght to a ssign or sublet is not necessarily

incon sisten t with an implie d covenant of continuous operation. The two covenants can be harmoniz ed t o per mit subletting or assignment to a business of the same character." First American Bank & Trust Co.,

729 P.2d at 941. Obv

iously, the plaintiffs' predecessors inten ded for a SupeRx, o r another fitting business, to occupy

these premise s. Lagrew, et al

v. Hooks-SupeRx, Inc. , 905 F.Supp. 401, 406 -07 (E.D. Ky. 1995).

The trial court held that the 1985 amendment to the lease contained an impliedcovenant of continuous occupancy, an d the preponderance

of the evidence supports this

conclusion.-21- Since this court affirms the finding that an implied covenant of

continuous

oc cu pancy exists, the next ques tion is whether or not

"Bud's Discount Cit

y" is

a"discount department store" within the co ntempl ation of the parti es at t he time of the execution of the 1985 amendment to the lease. The trial court found as a fact that "Bud's" was no

t a nd the evi dence does not preponderate against such finding. The "discount depar tment store" c

ontemplated by

the parties in 1985

was the discount department store that since 1982 had more than quadrupled its gross receipts from $2,047,072 .56 to $8,9 81,538.4 9. It was the "disc ount department

store" that had incr

eased percenta

ge rent als to the landlord fr om $17,149.06in 1982 to $43,130.77 in 19 85. It was the "discount departme nt store" that the parties, based on experience, had every ri ght to believe would continueto grow and thereby benefit both

BV T and Wal-Mar

t. True to its history after the

1985 amendm

ent authorizing expansion,

Wal-Mart incr

eased its gross receipts to

$29,551,354.91 and increased percentage rent t o $123,513.55.

The "discount departm

ent store" known as " Bud's Discount City ", the wholly owned subsidiary

of Wal-Mart oc

cupying the prem

ises su bse quent to 1995 has gr oss re venu es of a ppro ximate ly $3,0 00,00 0.00 p er ann um.

"Bud's" did not exist in 1985 and is best characterized by the witness T om Seay who was

the author of the "Bu

d's" concept. He

testified: THE COURT : When were the y first creat

ed? THE WITNESS: Oh, gosh, I don't know the exact year.But I would say it had to be -- THE COURT : Early '90s? THE WITNESS: Early

'90s, yes, sir. THE COURT: Okay. For what purpose were they created? THE WITNESS: Well,

actually, they were my

idea. THE COURT: And I've got a pret ty good id ea of why y

ou did it, but go ahead a nd tell me why. THE WITNESS: Well, what h appe ned was, I approached David Glass, who is our p

resident, and I tol

d him that I thought we had an opportunity in

some of the buildings that w ere vacant for us to put in anot her ope ration so we cou ld make mor e money. I said, [s]ome of th

ese markets a

re so good that we cou

ld put in another operation,

similar to the W

al-Mart, and I said, I think we couldmake a lot

of money doi

ng that. And so what

we did was, we looked at all of our vacant stores and said, Ok ay, on a mark et-bymarket basis, do we think w

e coul d m ake money? And the ones that we thought we could, we opened up the Bud's Discount Stores1 An obvious side effect of this arrangement is that Wal-Mart retains 84,000 square feet in Lebanon Shopping Center at a fixed annual rental somewhere between 63% a nd 74% of the s quare foot market value of the space in 1985 for a period extending through the y ear 2005. It also has a cushion of over $15,000,000 per annum gross receipts before "Bud's" would ever reach the $18,133,333 percentage rental threshold. -22- in. It wa s stric tly to mak e money. THE COURT: I under stand. Okay. But you didn't create a competitor for yourself. You didn't do that? That wasn't done? THE WIT NESS: No, sir. But what we saw is, we saw a market op portun ity. THE COURT: Oh, I

realize -- I unde

rstand th at . But if there's a market oppor

tunitythere for a Wal-Mart, then it looks like to me it makes sense to put a Wal -Mart store the

re as opposed to something entirely differen t, you know. T HE WITNESS: But we already -- we would have a Wal

Mart. THE COURT: You have a Wal-Mart -- THE WITN

ESS: This is in add

ition to the Wal-M

art. THE COURT: Well, I understand that. But you've also g ot many Wal-Mart stores around in different cities , d o you not? You've got mor

e than one in a lot of di

fferent cities,

do you not? THE WITNESS: Yeah . But not in a town li ke Lebanon, Tennessee. THE COURT: Wel

l, I rea lize that. I under

stand that. But you did not create Bud's - - well, I guess I need to ask

you. Did y

ou create Bud's to be

a competitor

of Wal-Mart in a small town? That's really what y

ou're talking about. THE WITNESS: What we did was, w e createdBud's to put in these stores because, number one, they were good locations ; number two,

the market would justify an additional discount store in the market; num

ber thr ee, we thought if w e could put Bud's in and be successful, the

n maybe we

would elim

inate another competitor fr

om coming in

and picking up the void

in the market; and, nu mber four , we thou ght we wo uld make money. 1

A 1999 Lincoln Town Car is an automobile. A 1925 Model T Ford is an automobile. They are not t he same. The

question whether "B ud's Discount City" is called a "warehouse" or a"discount department store" does not matter. Bud's clea rly is not what was conte mplated as a "di scount departme nt store" by the parties in 1985 and thus not the type of store

contemplated by

the 1985 implied covenant of continuous occupancy. The assignment by Wal-M art to Bud's was not an ". . . assignment to a business of the same character ". Firs t American Bank & Trust Co. v. Safeway Stores, Inc. , 729 P.2d 938, 941 (Ariz. App. 1986).

Wal-Mart has breach ed the i mplied c ovenan t of con tinuo us occu pancy an d-23-

is liable to the lan dlord for resultin g damages.

III. MEASURE OF DAMAGES FOR BREACH OF AN IMPLIED COVENANT OF CONTIN UOUS OCCUPANCY
"The measure of damages for breach of any contract is that which was reasonably

contemplated

by the parties.The general princ iple for assessm

ent of damages for breach of cont ract is that the

plaintiff is entitled to be placed, so far

as can be done by mo

ney, in the sam

e position he would have been in if the contracthad been performed." Hawkins v. Rey nolds , 62 Tenn. App. 686, 697, 467 S.W.2d 791,

795 (1971); see also Chambliss, Bahner & Crawford v. Luther , 531 S.W.2d 108 (Tenn. Ap p . 1975); Wilhite v. Bro wnsville Concrete C

o. , 798 S.W.2d 772 (Tenn. App. 1990) and Action Ads, Inc. v. W illiam B. Tanner C

o. , 592 S.W.2d 572 (Tenn. App. 1979).

This is in keeping with the "expectation interest" or "benefit of th e bargain" rule generally

app licable in sister jurisdicti ons. See 22 AmJur2d "Damages",

section 45, p. 68.

This court has held: ". . . that our Tennessee decisions are f ir m ly committed

to the policy of gran ting the vict im of a breac hed lease all of the damages which he sustained as a proximate result of the breach, so long as such d amage s are reasonably shown and capable of reasonably ac

curate ascertainment." Ferrell v. Elrod , 63 Tenn. App. 129, 153, 469 S.W.2d

678, 689 (1971).

We now address the issue of damages when an anchor tenant in a shopping center breaches a covena

nt of continuousoccupancy express or implied. In the last decade, appellat

e courts of

Nevada, Indiana

, and North Carolina, as well as the 10th Circuit of the United States Court of Appeals, applying Oklaho ma law, have addressed the issue.
The lineage

of the difference-in-value measure begins with what a c

ynic might call the "Snake-bi

t Hornwood Trilog y" from Nevada. Hornwood v. Smith's Food King No. 1 , was first deci ded by the

Supre me Court of Nevada on-24-

April25, 1989. In this opinion, reporte d in 772 P.2d at 1284, t

he Supreme Court of Nevada held the pro

pe r measur

e of damages f

or breaching the cov

enant of continuous occupancy to be the difference between the v alue of t he shopping center withanchor tenant

and the value without the anchor tenant. The case was re-tried in the district court and appealed. On March 6, 1991, the Nevada Supr eme Court held that the trial court had failed to properly asses s th e Hornwood's damages fo r the diminished value of the shopping center. Ho rnwood

v. S mith's Food King No. 1 , 807 P.2d 208 (Nev .1991). In the meantime, the incumbent tr ial judge lost his bid

for re-election and the case c ame on for a third trial be fore his successor. On this third trial, the successor judge did not hold an evidentiar y hearing but

simply adopt

ed the plaintiff's proof as to damages and entered judg me nt for $1,42 5,000 .00. O n app eal, t he Sup reme Courtof Nevada on August 28, 1992 reversed a

nd remanded for

a th ird ti me. Hornwood , 836 P.2d 1241 (Nev. 1992). In each of the Hornwood decisions, the Nev ad aSupreme Cour

t reaffirme

d its measure of

damages set fo

rth in the first decision in 772 P.2d 128 4.

In holding that the diminution in value of the entire shopping center was the proper mea

sure of damages, the Nevada Supr eme Court stat

ed: Smith's is a

sophisticated business entity. Smith's knew that it s presence as the an

chor tenant had a cr

itical impact on th e shopping center's success . Without an anc hor tenant, obtaining long-term financing an d attr acting satellite te nants is nearly impossible

for a shop p ing center. Perh aps most imp

ortantly, the anchor tenant insures the f

inancial viability

of the c enter by providing the necessary

volume of custom

er traffic to the

shopping center. Therefore, we find that the dis trict court clear

ly erred in c oncludi ng, as a matter of law, that the dim

inution in value of the Hornwoods'

shopping center was unforeseeable. Conner , 103 Nev. at356, 741 P.2d at 801. Accordingly, we reverse that portion of the district court's ruling and remand to the district court for an assessment

of the Hornwoods' damages as a consequence of the loss of their anchor tenan t. Hornwood v. Smith's Foo d King No. 1 , 772 P.2d 1284, 1286 (Nev. 1989).

In Pleasant

Valley Promenade

v. Lechmere I

nc ., 464 S.E.2d 47 (N. C.App. 1995), the North Carolina Court of Appeals,

in reversing

judgment non obstante veredicto followi ng an $8,000,000 verdict f or the plaintiff, d

etermined this-25-

question of first im

pression with relia

nce on Hornwood

. Said the court: In the context of a breach of contract between the ancho r store and the shopping center in which it res ide s, we recognize there are often extensive d amages. See Hornwood v. Smith's Food King No. 1 , 107 Nev. 80, 807 P .2d 208 (1991); Tyson , Drafting, I nterpreting, and Enforcing Comme rcial and Shopping Cente r Leases , 14 CAMPBELL L
. REV . 275 (1992). Th ese d amages result because the shopping center is a "cooperative enterprise, with each store's success depe ndent on the continued operation of the other stores . . . ." Dover Shopping Center, Inc. v. Cushman's Sons, Inc. , 63 N.J.Super. 384, 164 A.2d 78 5, 790 (Ct.App.Div.1 960). The contribution

of each store determines the flo w of business of the entire shopping center, and likewise, a stor

e leaving affects th

e center as a whole. See W & G Seaford Associates, L.P. v. Eastern Shore Markets, Inc. , 714 F.Supp . 1336, 1348 (D.Del.1989). Though a shopping center is ' cooperative" in natu

re, the anchor store is the f

ocal point of the entir

e shopping center. T

yson, 14 CAM P B ELL L
. REV . 301-303. The fun ction of the anchor is

"to providecertainty of i

ncome stream

, an identity

and stability

for the center which, in turn, dr

aws customer

s, attracts other

tenants and increases overall sales." I d. at 303. Further,

without an anchor stor e long-term fina

ncing is virtually

impossible to obta

in

. Hornwood

v. Smith's Food King No . 1 , 105 Nev. 188, 772 P.2d 1284, 1286 (1989). Therefore, the anchor's loss has been described as " worse than a flood, fire or tornado, because usually there i s insurance to cover[natural] disasters." Tyson, 14 CAMPVELL L
. REV
. at 303.
Pleasant Valley install

ed Lechmere

as the Cente

r's an chor st ore based on Lechm

ere's product m

ix, value offere

d, aggress iv e advertising

method, and re

gional drawing powe

r. Lechme

re, in breach of the Agreement, abandoned the Center. As a result of Lechmere 's abandonment, P leasant Valley

claimed dam

ages arisi n g from: (1) harm to the

overall probability

of success of the Center; (2) harm to the fa

ir market value

of the Center; and (3) harm to the Center's ability to attra

ct and retain non-anchor tenants a nd a corresponding

redu ctio n in customer tr affic and the atte

ndant decrease in sales revenue.
Therefore , consi stent with t he gu idan ce of o ur Sup reme Court, we believe a dam

ages remedy

should beavailable to Pleas ant Valley which promotes the frequently declared objective of plac

ing "the injured part [y] in as good a position as they w

ould have been in if the contract had

not been breached . . . ." Knapp, COMMERCIAL DAMAGES: A GUIDE TO REMEDIE S IN BUSINESS LITIGATION , § 1.02 (Matthew Bender 1995). Accordingly, we concl ude th e damages measureasserted by Pl ea sant Valley, diminution in market value, is recoverable in a

breach of contrac

t action.
Pleasant Valley Promenade v. Lechmere Inc. , 464 S.E.2d 47, 61-62 (N.C. App.-26-

1995). An appeal of Lechmere was gr anted by the Suprem e Court of North Carolina (472 S.E.2d 18),

but on Decembe

r 10, 199 6 befo re argument in the supreme court the case was settled and the appeal withdrawn. Pleasant Valley Promenade v. Lechmere Inc., 345 N.C. 346, 484 S.W.2d 92 (N.C. 1996).

Almost simultaneously

with Lechmere , the Court of Appeals of Indiana decided Scott-Reitz Ltd. v. Rein Warsaw Associates , 658 N.E.2d 98 ( Ind. 1995). Again, relying on Hornwood , the Indiana Court of Appeals es tablished a diminution

of value approach involving the entire shopping center. This was done in part by an income capitalization approach similar to the plaintiff's pr

oof in the ca se at b ar. In adop ting the di minut ion o f ma r ket value approach t o damages the cou

rt stated: Scott argues the trial court's award contains ant icipated lost future rental profit, from the B tenants, which is too speculative an amount to properly base an award of damages. E

vidence of

future profits was relev

ant, insofar as it a

pplied to the value of t

he Lease on the date of the breach. Rein's evidence of futu re profits was relevant not as to anticipated los

t profits as such, but

rather as going to the fair market value of the Lease. See Ann o n II 597 N.E.2d at 326-238.
Scott -Reitz Ltd. v. Rein Warsaw Associates , 658 N.E.2d

98, 106 (Ind. Ct. App. 1995).

The trial court in the case at bar award ed compen satory dam ages in the amount of $2,507,674 repr

esenting the present value of lost future percen

tage rents for the duration of t he lease. This w

as apparently ba

sed u pon th e alternative

measure of da

mages testim

ony off ered by the witness Samuel R. Boles.

In the examina

tion of the witness B oles the record show s: Q. Now, let me ask

you, please, sir, with respect to damages here

-- and I'll just tell the

Court initially,

we've calculated the damages in tw o diff

erent manner

s. Let me as

k you first whet

her or not you've done the se cal culations. The fi rst one, Mr. Boles, is the difference in the value to thi s center, to the ow ners, BVT, the plaintiff here, with and w

ithout Wal-Mart in pla

ce. Have you

done that calculation?-27- * * * Q. What's the num

ber, Mr. Boles? A. 4.7 million. Q. Andthat is what the center is worth less as a re sult of WalMart not being there? A. Right. Q. Tell the Court how you calculated that number. A. Using act u al scheduled rents a nd actual experienc

e of expenses and capitalizing the net income. Q. Have you done this more than once in your life? A. Many, many tim

es. As an example, and to answer Mr. Comstock, I ha ve with in the last 24 mont hs bought and/or sold eight different retai

l investment

s. I have two currently under contract. This is somethin g I do frequently is

value property,

both for acquisition and sa

les. Q. Let me ask you,

please, sir, this

is a big number. I want you to concise ly but adequately e xplain to the Judge exac

tly how you calculated it. You said you took projected rents, actual re nts. Walk us through that. Just tak

e a couple of minutes and walk us through that.
* * *
A. Your

Honor, what I did is in the last year of operating, which was 12/31/96 on the calen dar year, when B ud's was obviously operatingin the premises, I took the base and actual scheduled rents, I took

the expense reimbu

rsements, the

actual ones, I took the actual vacan cy, and come up with the total receipts,

actual receipts for 1996, which is $7 85,264. I took the actual expenses, Your Honor, of 204,585, which is anet income of

580,679. We had capital expenses, Y our Honor, of tenant improvements and replacement reserve which is com puted at10 cents per square foot, totaling 56,420 , leaving a net cas h flow of $524,259. I researched the market to find out what cap ita lization rate would be used, Your Honor, for properties wi th a Bud's operating in the pr emises. And the research in the marketplace told m e a t minimum it would be 12 1⁄2 to 15 p ercent. And in this ana lysis, I used 14 percent. And I came up with a value, Your H onor, of 3,745,000 as a Bud's

. I took thelast full year of operating year, Your Honor, for the Wal-Mart store. I took the a

ctual scheduled lea

ses that were at t

he shopping center.
* * * Q. Okay, Mr . Bol es. You've given u s an evaluation on the method described by you that showed the value of the center without Wal-Mar

t there in the sum

of $3,745,000; corr

ect?-28- A. Correct.

MR. WHITE : I think Mr. Agee w ants to look

at my chartthat they didn't want us to see. But that's fine. We'll note that. BY MR. WHITE : Q. Now, I'm aski

ng yo u, please, sir,

about your evalua

tion of this center had Wal-

Mart stayed. And I've cut y ou off in this dialogue, but start one more time. A. I used the last full yea r, fiscal year t

hat Wal-Mart - - excuse me, calendar yea

r, '94, that W al-Mart was oper ational. I took the ac tua l scheduled leases of the existing tenants a

s well as their option terms. More in particularly, I was lookingat this particular year. I took t he base rent and the percentage rent that Wal-Mart paidor would have owed for that year , the expense reim

bursements that would have been paid for that year , less t he vaca ncy o f 4 1⁄2 percent. The tot

al receipts were

$1,072,779. The expenses were inc

reased to 223,131 as a r esult of the increase in tax base subsequent to Wal-Mart bei ng operational. Th

e netincome was 849,648. The capital expenses an d the replacem

ent reserves totaled 26 ,535, resulting in a net cash flow of $823,113. Now, similarly, as I did the other example, I questioned investors. And with Wal-M art operational and Wal -mart as an integral part of this inves tment, capit aliza tion rates range d from 9 and a quarter to 9 an

d three-quarters. I used the top end of that spe ctrum. And I come up with a value of $8,440,000, for a d ifference in valu

e of 4,695,000 or $4,700,000. Q. I'm sorry? A. Rounded to 4,700,000. Q. But the precise

number in diffe

rence in this center without

a Wal-Mart present is a decrease i n value of $4,695,000;

correct? A. That's correct

.

While Mr. Bole's testi

mony was a

dmitted over the

repeated object

ions of Wal-Mart,

it is consistent with the market value approach of Hornwood, Lechmere, supra, Scott-Reitz Ltd. , supra , and Joh n A. Hen ry & C ompa ny, Ltd. v. TG&Y Stores , 941 F.2d 1068 (10t h Cir. 1991).

Since no o ther e vidence in the record addresses diminution of market value of the shopping center as the measure of damages, and since this court finds diminution in

market value

of the shopping center to be the proper measure of damages for br

each of the imp

lied covenant of cont

inuous occupancy,

the j udgmen tof the trial court w ill be modified t

o reflect such dam

ages in the amount of $4,695, 000.-29-

IV. THIRD PARTY RECEIPTS Within the leased premises, Wal-Mart allowed Medco Dru gs, Inc. to operate a pharmacy . During the last t wo years tha

t Wal-M art and Medco occupied the leased prem

ises, percentage

rent was not paid by W

al-Mart on

gross receipts attributa

ble to Medco sales.

The trial court grante

d partial summ

ary judgm

ent to BVT holding tha

t the ap plicable

lease agreem

ent in this respect w

as unambiguous. This h olding i s clearly corr

ect.
The assigning and suble

tting provision of the a

greement stat

es: The Lesse e covenants not to assign, mortgage or encumber this agreement,

or sublet or use or pe

rmit the demised prem

ises, or any part thereof, to be use d by others without the prior written consent of the Lessor, w

hich consent shall not be un r easonably withheld. However , Lessor expres sly agre es that Lessee ma y, without Lessor's consent,

sublease or

assign this lease to a

n affiliate or subs idiary.

If Medco is in fact a third party, no written consent of the lessor was ever sought or received.If Medco is an oper ating department of Wal-Mart, then its gross receipts are

Wal-Mart's gr

oss receiptsand Wal-Mart, within the

demised premises,cannot

divid e itself into com

ponent parts to the end of reducing its gross receipts.

We observe thatWal-Mart did not segregate its

gross receipts attr

ibutable to Medco sales until the

last two year

s of its operations,

which was after the lawsuit at bar had b

een filed. 'Parties are far less liab

le to have been m

ista ken as to the meaning of their contract during the period while harm

onious and practical constr uction reflect s that i ntenti on, tha n they a r e when subsequent

differences 'ha

ve impelled them to resort to law, and one of them thenseeks a construction at variance with the practical construction

that they have placed

upon it of whatwas intended by its provisions.' Pigg v. Houston &

Liggett , 8 Tenn. App. 613, 633-34 (1928). (citing 6 R.C.L. p. 853 sec. 241.) See also McDowell v. Rambo , 21 Tenn. App. 448 111 S.W.2d 892, 899 (1937).-30- Having affirmed the

trial court's dete

rmination that W

al-Mart isliablefor percentage

rent based on Medco' s gross receipts, t his court moves to

determine the amount underpai

d, which should

be a simple m

atter of mathe

matics. Inde

ed, the affidavit of Kand

y Beaver, supervisor of the accounting department of

WalMart, given February 25, 1997, would appear concl usive on this point. She states, "Attached heret o . . . is a computation reflecting (a) historically, what Wal-Mart actually paid (b) what addit

ional should have been paid if third party receipts are to be included ($108,759 .23); and (c) wha t should have been paid (a nd what is due Wal-Mart , $186,501.77) if t

hird party rec

eipts are not to be included."

The court has determined that third -party rece

ipts are to be include

d and the figure provided b

y Wal-Mar

t andused by

the trial court in it

s judgment for third party rec

eipts rentals is $108, 759.23.
The judgment

of the trial court i

n this respect is aff

irmed.

V. THE RIGHT TO A JURY TRIAL Neither party asked for trial by jury in their original pleading. By amended complaint,BVT sought the rec overy of percen tage ren tal on " third p arty" receipts realize

d by Medco.

In its answer to this amended complaint on July

5, 1996, Wal-Mart noted

on the face of such answer "Jury T rial Requested".Such a

demand is adequa

te underRule 38.0 2 if, in fact, the amended com

plaint and the answe

r thereto present additional questions of

fact. The trialcourt held that no such additional facts were presented b

y the amend

ed complaint and

answer thereto but

only issues of law wer

e tendered.

T his issue involves co ntract interpretati on for the court. If BVT w a s correct in its interpretation (

acquiesced in by

Wal-Mart until after suit

was filed) Wal-Mart owed BVT for Me

dco sales subsequent to

the reversal of pos

ition by Wal-Ma rt. If Wal-Mart's interpretation of the contract was correct, and such "third party" recei

pts were not

includable in Wal-Mart's gross receipts, then BVT-31-

owed Wal-Mart rei

mburseme

nt for previously

paidpercentage rent b ased upon Medco gross receipts. There being no dispute as to the applicable contrac t provisions, and

no ambiguity therein, the inter pretation thereof is a question of law for the court. Petty v. Sloan , 197 Tenn. 630, 277 S.W.2d 355 (1955).

Once the court determi

nes thequestion of law as to contract interpre

tation the amount owed should be and in fact is, under this record, a mathematical certain ty. Such is established by Wal-Mart's ow

n proof in the

form of the

Kandy Beaver affidavit of February 25, 1997. If BVT's interpretation is correct, th e amount owed by Wal-

Mart is $108,759.23.

If, on the other ha

nd, Wal- Mart i s correct in its interpretatio

n of the contract, B VT owes Wal- Mart $186,501.77. There simply is no factual dispute.

This mathematical ce

rtain ty is explicitly recognized in Wal-Mart's brief wherein it is stated at footnote 11 on page 39 of the brief: "This should include

ajudgment on W

al-Mart's counte

r-claim for

its positio n that it inadvertently overpaid BVT for a num

ber of years; it is undisputedthat a mo unt of such overpayment is $186,501.7 7 . . . ." (emphasis added). It is equally undisputed that the amount owed to BVT, if the contract interpretation ques tion of law is decided in its favor, is $108,75 9.23. It is exactl y this latter am

ount plus calculable

interest thereon t hat was awarded by the trial cour

t. The third part

y complaint,the answer there to, and the counter-complaint raise d only issues of law and not issues of f

act.

" There is no r ight to jury tria l where t here is no issu e of fact but on ly a question of law in a case. State v. Moore , 206 Tenn. 95 , 332 S.W .2d 176-77 (1960) (citations omitted).

"In order to create a jury question there must be a conflict in substantial evidence. Accordingly,

the right totrial by jury

does not apply whe

n there is no genuineissue of fact to be t ried, nor does it apply to issues that are m atters of law." 47 Am

Jur.2d Jury, § 16, p. 724.

The chancellor was correct in denying Wal-Mart's request for trial by jury.-32-

VI. SANCTIONS By order entered on September

9, 1997, the trial c

ourt imposed sanc

tions against Wal-Mart

in the amount of $ 6,240, represent ing auditors fees for

work done in Bentonville, A

rkansas, on May

27, 28, and 29, 1997.

T his court can find no ju stification for the imposition of such

sanc tion s underthe record in th

is cas e. The audit wa

s for the purpose of c

alculating the

am o unt of "third party " sales of Medco. T his court has affir

med the mathematical

certainty of this am

ount in our

discussion of the jur

y trial right. Unless there were ques tio ns of fact still to be resolved following t

he Kandy Beaver affidavit, there was no reason for the May, 1997 audit in the first place. If such questions of fact existed as would justify f urther audit, it w

ould necessarily

follow that Wal-Mart's answer to the third party complaint tendered i ssues of fact and Wal

-Mart's jury

demand was w

ell taken. The r

ecord at t rial , how ever, d oes not bear out such f act issues that would

justify the au

dit, and comments

by the court

at the hearing of July 1 5, 1997, relative t o these sanctions is revealing.

The patience of the trial judge with counsel and with Wal-Ma rt reached its breaking point at this hearing w hich result

ed in an extended lecture to counsel for Wal-Mart relati ve to it s alleg ed fail ures to produc e prope r record s at the May, 1997 audit. After the

trial court had, a

t length, vented its f

rustration upon counsel for Wal-Mart

about the pro posed a udit o f these "third party" receipts of Medco, the follow

ing exchange occurr

ed: MR. WHITE: W

hen we started t

he trial, Your Honor had already granted our moti

on for partial sum

mary jud gment and

had denied the motion of

Wal-Mart to reconsider. We put Mr. Boles on the stand. Mr. Boles testified tha

t he took the -- he did

a calculation of the damages. Yo

ur Hon or listene d to it. He starte d with the $108,000, which was admitted by Wal-Mart

was the amount

in their calculation

that was owed. H

e put interest on

that. It was tendered as an exhibit. Andthe number that

he gave, may

it please the Court, and I'm reading specifically f

rom the transc

ript, the numbe

r t hat he calculated was $144,689.75. A nd he te s tified, quote, "th at is throughJanuary 31st of 19 97. We have a per di em figure of

$39.64 per day."-33- May it please the C ourt, I t ook th e months of Febru ary, March, April, May, and June, which total exactly 150 days. So that would be through the end of th e month of Ju ne. That 's 150 d ays times the per di

em figure of $3 9.64. That is an a dditional $5,946. Andwhen that is added to the testimony that Your Honor heard and approved when this m an testified, that gives the number that's set out in that order of $15 0,635.75. THE COURT: Wel

l, Mr. White,

is this what w e're talk

ing about now? What is this for? MR. WHITE : This is for the par tial summa

ry judgme

nt. THE COURT: I real ize t hat. Is that for th e sales of the drugstore? MR. WHITE: Yes, Your Honor. THE C OURT: Well , what are we d oing? Why have I

just got through talking to Mr.Comstock about a ll thes e matters if you've done figur

ed it out? MR. COMSTOCK: That's exactly right, Y our Honor.

BVT asserts correctly

that the $108,759.23 f

igure set forth in the

affidavit of Kandy Beaver

of February 25 , 1997 is conclusive an d inde ed undisputed as to the amount of Me dco sales to be incl uded in gross receip ts if the BVT interpretation

of the contract is c

orrect. The BV

T interpretation o

f the contract, accepted by the trial cour

t andaccepted by

this court, results in the mathematical certainty evidenced by the Kandy Beaver affidavit. Thus, the a nswerof WalMart to the BVT amended complaint tende

red no issue

of fact f or tria l by jury. BVT cannot have it both

ways. Eithe

r the Kandy Be

aver affidavit is c

onclusive of the fact issue about

the extent of

Medco gross receip

ts for all purposes or

it is simpl y evid ence of such gross receipts to be considered along with other evidence in which case the sanctions imposedwould be in the sound discret

ion of the court. The other edge of this sword is that in such case, issues of fact were tendered by the answer t

o the amend

ed complaint and

Wal-Mart's de

mand for trial by jury on a

ll issues would be we

ll taken. This cour

t concludes that there is no genuine dispute of the figures in the Kand

y Beaveraffidavit and that t he imposition of sanc

tions was improp

er and should be reve

rsed.

VII. ATTORNEY FEES The trial court awarded attorney fees under the lease contrac

t in favor of BVT in the am

ount of $170,042.61 thr

ough June 30, 1997.-34- The awarding of these attorney fees is provided for in the contract, and the amount thereof is generally within the discretion of the trial judge. The factors identified for guidance of the trial judge are set forth in Conners v. Conners , 594 S.W.2d 672 (Tenn. 1980). The award of at torney fees will be modified to disallowany attorney

fees for work do ne on the "third party" receipts issue, subsequent

to the filing before

the trial court of t

he Kandy Beave

r affidavit of February 25, 1997. In all other r espects the awar

d of attorney fe

es is affirme

d.

VIII. CONCLUSION In this case, the court a

dopts a measure

of damages conf

orming to th

e diminution

of value of the entir

e shopping center rul

e, having its rece

nt genesis in Hornwood . This diminution of valu e rulewas further deve

loped in the 1995

cases of Pleasant Valley Promenade v. Lechmere, Inc. , 464 S.E.2d 47, 61-62 (N.C. App. 1995) and Scott-Reitz Ltd. v. Rein Warsaw Associates , 658 N.E.2d 98 (Ind. 1995).

Itmust again be noted that the Supreme Court of North Carolina granted

an appeal from Lechmere but before argum

ent could be held befo

re that court of last resort, the parti

es settled the case

and th e a ppeal was withdra wn. The diminution

of value of the entire shopping center approach appears to this court to be consistent with Ferrell v. Elrod , 63 Tenn. App. 129,

154-55, 469 S.W. 2d 678, 689 (1971).

Under the facts presente

d herein, this court

finds, applyin

g th e factors recognized by the Supreme C ourt of Tennessee in Kroger v. Chemical Securities Co. , 526 S.W.2d 468 (T enn. 1975), an im

plied co venant of continuous occupa ncy. Perhaps most e xpressive of the deve

loping la w rela

tive to such impliedcovenants is the

rule articulated b

y the court in Pequot Spring Water Co.

v. Brunnell, 4 6 Conn. App. 187, 698 A.2d 920 (1997). I t is again well to note that the Supreme C

ourt of Connecticut g

ranted an applicati

on to appeal in the Brunnell case but that before the case could be ar

gued in the Suprem

e Court of Connecticut it was settled and the appea l withdrawn in Mar

ch, 1998.

This court having f

ound an implied covenant of continuous occupancy-35-

underthe facts of this case, and having adopted the d iminution of m

arket value of the entire shopping center as the proper of dam ages, the judgm

ent of the trial courtas to damages is m

odified to reflect

total damages f

or such diminution in value in the amou

nt of $4,695,000.

The award of dam

ages by the

trial court for "third party" receipt rentals as to Medco sales is af

firmed.

The award of san

ctions by the tria

l court against Wa

l-Mart is reverse

d.

The award of attorney fees to BVT is modified to disallow attorney fees to the extent such fee s reflect work on t h e "third party" receipts issue past the time when

the Kandy Bea

ver affidavit of F

ebruary 25, 199

7 was filed with the court.

As modified here

in, the decree of

the chancellor is a

ffirmed and th

e case is remanded fo

r further procee

dings in conformi

ty with this opinion

. Costs of the appeal a

re assessed against

Wal-Mart.

______________________ _____ ____ _ WILLIAM B. CAIN, JUDGE

CONCUR:

__________________________________ WILLIAM C. KOCH, JR., JUDGE

__________________________________ DAVID WELLES, SPECIAL JUDGE-36-